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EE's revenues dip, but smartphones lure in 200k new contracts

4G not the promised goldmine, though

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UK telecoms giant EE's first annual results are in, showing cost savings and revenue growth wiped out by regulatory changes, but customer numbers are up - even if it's not 4G that's attracting them.

The UK's biggest network operator posted full-year earnings of £1.41bn for 2012 before the numbers for tax and depreciation (EBITDA) on revenues of £6.65bn pounds, but that wasn't quite enough to make a profit. Instead EE saw an overall loss of £249m, despite adding 201,000 contract customers, increasing revenue, and cutting costs, because regulatory changes - notably the cut in mobile termination rates - cost it dearly.

Take those changes out and revenues would be up 2.7 per cent compared to 2011.

But it does seem that EE is positioned well for 2013, as 4G is attracting customers and 4G customers pay an average of 10 per cent more for their contracts. The company also said that its 4G monopoly has paid off to some extent. Quite how much it won't say - there aren't any numbers for 4G subscribers. EE says that's to prevent interference with the ongoing auction, but as industry analysts at Ovum point out:

If customer uptake was far ahead of expectation, then we would hear about it. We therefore have to conclude that uptake has not been spectacular.

The analysts also noted that EE's premium pricing of 4G is unique in developed markets. Neither Japan, South Korea nor the USA charge significantly extra for LTE services - but then none of those countries gave a single operator quite such a monopoly as EE achieved in the UK.

EE was formed by the merger of Orange and T-Mobile, so has been busy switching off 2,659 cell sites (duplicates, one would hope) and closing stores (78 to be shuttered, some still in progress) so the savings are on track and operational costs should continue to decline.

Churn is very low, 1.4 per cent, and more than half of EE's customers are on contracts these days, which increases loyalty and Average Revenue Per User (ARPU) too. That ARPU is, however, still coming from voice services. EE is justifiably proud that "non-voice revenue" now makes up 50 per cent, but look a little closer and one sees that SMS is still important as data only makes up 34 per cent of what customers pay.

EE has successfully launched a new brand, rolled out a working 4G network and increased both revenue and customer numbers, but it hasn't really exploited the 4G monopoly as many had expected it would. Like the rest of the industry, it appears to still be clinging to a world of voice and text services which is slowly disappearing. ®

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